Newton Golf Company, Inc. (NWTG) Earnings Call Transcript & Summary

Good afternoon. Thank you for joining us today to discuss Newton Golf Company's First Quarter of 2026 Operating and Financial Results. Thank you. Before we begin today's call, I would like to provide the company's safe harbor statement that includes cautions regarding forward-looking statements made during today's call. The information that we have provided in this conference call includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including, but not limited to, statements regarding the company's ability to support working capital needs, operational scaling initiatives and future growth opportunities, future revenue, future plans, objectives, expectations and events, assumptions and estimates. Any forward-looking statements made during this conference call are not guarantees of future performance and involve certain risks, uncertainties and assumptions, which are difficult to predict, and actual outcomes and results may differ materially. For more information about risks and uncertainties associated with the company's business, please refer to the Risk Factors section of the company's SEC filings, including its annual report on the Form 10-K and subsequent quarterly reports on Form 10-Q. The company expressly disclaims any obligations or undertaking to update or revise any forward-looking statements. Hosting the call today is Newton Golf Interim Chief Executive Officer and Chief Technology Officer, Aki Yorihiro; and the company's Chief Financial Officer and Chief Operating Officer, Jeff Clayborne. Following their remarks, we will open the call to your questions. [Operator Instructions] I'd like to remind everyone that today's call is being recorded, and it will be made available for telephone replay. Please see the instructions in today's press release that has been posted to the Investor Relations section of the company's website. Now I'd like to turn the call over to Newton's Golf Interim CEO, Aki Yorihiro. Sir, please go ahead.

Good afternoon, everyone, and thank you for joining us. We believe Newton Golf remains in the early stages of scaling the Newton Motion shaft platform across additional product categories, professional fitting channels, retail relationships and international distribution opportunities. Following record net sales growth of 136% in 2025, we continued executing strategic initiatives during the first quarter intended to support long-term growth, production scalability and broader market adoption. These initiatives included investments intended to support future production capacity and manufacturing efficiency as demand for the Newton Motion platform continues to expand. While these initiatives temporarily impacted shipment timing and near-term financial performance during the quarter, demand for Newton Golf products remained strong throughout the period. As of quarter end, delayed shipments represented approximately $1.2 million of customer deposits and open sales orders that we expect to convert into revenue as fulfillment activities continue improving during the current quarter. During the quarter, we continued expanding our domestic and international distribution channels. We strengthened our international presence through an exclusive Voice Caddie distribution agreement in South Korea, one of the world's leading premium golf equipment markets. We also secured a $136,000 opening order under the partnership, which exceeded the minimum order requirement, and we expect to recognize that revenue in the second quarter of 2026. We also expanded our professional club fitter network to approximately 235 accounts, an increase of 99% from the first quarter of 2025, continuing to strengthen our presence within the premium fitting market and broaden golfer access to the Newton Motion platform. At the 2026 PGA Show, we introduced the Fast Motion fairway wood shaft and hybrid shafts, which are expected to launch commercially in the third quarter of 2026. These product introductions extend the Newton Motion platform and the DOT fitting system across additional club categories and support a more integrated multi-club fitting approach. Because golfers typically carry a driver, multiple fairway woods and multiple hybrid clubs, we believe this platform strategy creates the opportunity for multiple Newton shaft placements within a single golf bag rather than a single driver replacement. Over time, we believe this may support increased average revenue opportunities per golfer and per fitting transaction as adoption of the Newton Motion platform continues to expand. With that, I'll turn the call over to Jeff to review our financial results.

Thank you, Aki, and good afternoon, everyone. In Q1, revenue decreased 18% to $1 million. The decrease primarily reflected temporarily reduced manufacturing capacity and delayed order fulfillment associated with operational initiatives implemented during the quarter to support future growth opportunities. Importantly, customer demand remained strong during the quarter with approximately $1.2 million of customer deposits and open sales orders at quarter end that we expect to convert into revenue as fulfillment activities continue improving. Gross profit totaled $628,000 or 63% of net sales compared to $852,000 or 70% of net sales in the prior year quarter. Gross margin was temporarily impacted by lower production volumes during the quarter, which reduced fixed cost absorption and manufacturing utilization. Total operating expenses increased 15% to $3.2 million. The increase primarily reflected approximately $0.2 million of bonus accruals and higher labor and manufacturing-related costs associated with the temporary production inefficiencies during the quarter as well as research and development activities supporting operational scaling initiatives. These increases were partially offset by disciplined expense management, including reductions of approximately $0.2 million in sales and marketing expenses and approximately $0.1 million in professional service expense. Net loss for the quarter of 2026 totaled $2.7 million or negative $0.58 per share compared to a net loss of $0.5 million or negative $0.55 per share in the prior year quarter. Turning to our balance sheet. Cash and cash equivalents totaled $593,000 at March 31, 2026. During the quarter, we completed the initial $500,000 convertible note closing under our previously disclosed securities purchase agreement dated March 16, 2026, which included a fixed conversion price of $1.60 per share together with warrants to purchase 50,000 shares of common stock at an exercise price of $1.75 per share. Subsequent to the quarter end, we issued an additional $850,000 convertible promissory notes to unrelated third-party investors pursuant to the same financing agreement. We believe these financings, together with our existing ATM facility, provide additional flexibility to support working capital needs, operational scaling initiatives and future growth opportunities while maintaining what we believe are relatively shareholder-aligned financing terms, including fixed conversion pricing and limited warrant coverage. I'll now turn the call back over to Aki.

Thank you, Jeff. As I mentioned in my opening remarks, at the 2026 PGA Show, we introduced the Fast Motion fairway wood shaft and hybrid shafts, which are expected to launch commercially in the third quarter of 2026. These launches build on our momentum within the professional fitting channel, where Newton shafts ranked as the #1 selling shaft for both drivers and fairway woods at Club Champion in 2025. These product introductions expand the Newton Motion platform and extend our DOT fitting system across additional club categories. The DOT system is designed to provide golfers and professional club fitters with a more consistent fitting structure across driver, fairway wood and hybrid configurations, supporting a more integrated multi-club fitting approach. More than 60 professional golfers currently play Newton Motion and Fast Motion shaft across the PGA Tour, PGA Tour Champions, LPGA and Korn Ferry Tours, supporting continued brand awareness and fitting adoption among golfers and professional club fitters. Because golfers typically carry a driver, multiple fairway woods and multiple hybrid clubs, we believe this platform strategy creates the opportunity for multiple Newton shaft placements within a single golf bag rather than a single driver replacement. As adoption of the Newton Motion platform continues to expand, we believe this structure may support increased average revenue opportunities per golfer and per fitting transaction over time. We also continue expanding our international distribution presence through our Voice Caddie partnership in South Korea and believe the relationship supports continued growth opportunities within one of the world's leading premium golf equipment markets. Operationally, we continued enhancing manufacturing management and production planning processes intended to support long-term scalability and future growth opportunities. During the quarter, we expanded operational oversight within management and in April, hired a manufacturing executive with more than 25 years of experience to support production scaling initiatives and future product launches. As fulfillment activities continue improving and production volumes normalize, we believe the underlying demand trends for the Newton Motion platform remains strong. With approximately $1.2 million of customer deposits and open sales order at the quarter end, expanding distribution relationships, continued growth within the professional fitting channel and upcoming product launches across additional club categories, we believe the company remains well positioned for continued growth in 2026. Following a record net sales growth of 136% in 2025, we believe the investments made during the quarter strengthened the company's foundation for future scaling opportunities. And while we are not providing formal guidance, we currently anticipate 2026 will represent another record year for Newton Golf. With that, we'll open the call for questions.

[Operator Instructions] We take the first question from the line of David Marsh from Emerging Growth.

I just wanted to start out with a capacity question. With your current operational capabilities, what do you think your production capacity is on an annual run rate basis at this point?

Well, I would say that's an evolving question, David, and I appreciate the question. Our capacity within that building is over 200,000 shafts a year. That would require us staggering some additional shifts. Our capacity as of steady state, not adding additional resources is between 60,000 and 70,000 shafts right now. And we did -- commercially, we sold just over 40,000 shafts last year. So we have room to grow before we need to begin adding some additional shifts on a full-time basis.

Okay. And then just turning to kind of adoption at the Tour Pro level. You guys had announced prior quarter something between 60 and 70. I mean did you have any major signings in the most recent quarter that you could highlight and kind of provide an update of where you are in terms of Tour Pros playing your shafts at this point?

Yes. There are probably another dozen players that are playing the shaft for the first time this year, which is fantastic. Many of them, I can't mention the name today because we do not have an NIL relationship with them yet. But the -- what I will say is that as it relates to the current investment that we made in the factory to improve our production, that also leads to higher performance out of the shafts. And we've gotten tremendous reception on the tour and also from amateurs when I do demo days and so forth. We really see that coming through. And so, so far, it's been an exciting year. We haven't had a win yet, unfortunately, but we've had numerous top 10s. And I think it's -- hopefully, it's going to be a great year.

Sounds good. And then just kind of my last question, and I'll get back in the queue is, I guess, kind of the holy grail for you guys would be to get the original equipment manufacturers to adopt your shafts in their manufacturing. Could you guys give us an update today in terms of conversations that you may be having and any progress and any kind of indications of interest from any of these major manufacturers in terms of potentially bringing your shafts into their kind of production facilities and such?

Sure. Jeff, do you want me to take that? You want to take that?

No, you can take it. And if there's anything I can sort of add...

Yes. So David, yes, this is a very large bucket that we have been trying to open. And I think that process is here now. So we're talking to multiple OEMs out there right now. One is a very large one. I can't -- again, I can't name the -- give you the name, but we are pretty far along with them. We are in their -- the headquarters. We're getting into their national fitting program that they have. And we are also in their tour program officially. So where our shafts are carried by their tour van as opposed to us being on the ground distributing the shafts. And so -- that's where we are. It is -- we have received -- we have actively been shipping products to them to further that relationship. I mentioned a little bit a month ago, I think the flow on the OEM relationship will probably look like the first stage is getting into their fitting program, and that will be at their main location or satellite locations that they have them and then certainly the national fitter network that they operate themselves. And that's very exciting because we know that our shafts are really easy to fit and they perform really great, and it's new. And everybody likes to see the new offering. So very, very excited about that. There is another OEM relationship that we are talking to where we could potentially go straight into their web offering. So those are the opportunities we're looking at. And it seems like things are progressing nicely.

The piece I would add connecting the dots related to that is we have been mentioning for the past couple of quarters that this part of the business has been heating up. Q1 being typically the slowest quarter for the company since there's a little bit of seasonality related to the bulk business. In order to facilitate making major strides and taking the next steps with these OEMs, it was important for us to improve, make some adjustments in the factory, which is why we did what we did to accelerate those relationships. Otherwise, we could remain status quo.